How a failed audit missed the $8 billion theft at the heart of FTX’s collapse

The audits that were supposed to safeguard FTX investors failed to detect the misappropriation of billions in customer funds because the lead auditor didn’t understand the company’s core relationships or risks. Francis Decker, a partner at Prager Metis CPAs, LLC, led the team that audited FTX in 2021 and 2022, signing off on reports that the U.S. Securities and Exchange Commission (SEC) now says were materially deficient. The SEC found that Decker did not ensure compliance with generally accepted accounting standards (GAAS), a failure rooted in the audit team’s lack of understanding of both FTX’s operations and the crypto markets. The auditors did not grasp the nature of FTX’s relationship with Alameda Research LLC, the hedge fund also controlled by FTX founder Sam Bankman-Fried. That relationship was not peripheral—it was central. The SEC stated that the FTX-Alameda connection was at the heart of the theft of billions in customer assets that precipitated FTX’s collapse in November 2022. Because the audit team failed to assess this risk, it issued flawed reports that gave investors and regulators false confidence. Without admitting or denying the findings, Decker agreed to be barred from practicing before the SEC, eligible to apply for reinstatement after two years. The firm, Prager Metis, settled separate enforcement actions in 2024 by paying $1.95 million in penalties, disgorgement, and interest, while agreeing to permanent injunctions and reforms to its audit procedures.